February 12, 2009: Morning Call

February 12, 2009: Morning Call

Fair Value: SP500 – 832.10; NDX: 1227.09; DOW: 7979.92

Technical Levels:


SPX: 752-755, 800, 816 support/848-852, 874, 899-908 resistance

Events:

Pre-market EPS: AET (.95/8.01B); ECA (.81/5.87B); FCL (.48/448.3M); GLG(.07/90.0M); KO (.62/7.58B); MAR (.41/3.67B); MAS (-.05/2.11B); MLM(.83/423.8M); NXY (.39/1.51B)VIA (.79/4.23B); WMI (.49/3.16B)
05:00: Euro-zone Industrial Production (Dec): -2.5% MoM; -9.5% YoY
08:00: UNP presents at BB&T Transport Conference
08:30: US Retail Sales (Jan): -0.8%; Less Autos: -0.4%
08:30: Initial Jobless Claims (Feb 7): 610,000; Cont. Claims: 4.8 million
09:30: NSC presents at BB&T Transport Conference
10:00: Business Inventories (Dec.): -0.9%
10:15: CSX presents at BB&T Transport Conference
10:30: EIA Natural Gas Storage Change
Post-market EPS: CEPH (1.37/525.9M); COG (.42/242.6M); EQ (1.23/1.49B); MFE(.52/420.9M); PNRA (.84/351.9M);


Foreign Market Summary/Key Macro News/Commentary:

The S&P futures are trading 8 points below fair value while the NASDAQ futures are trading 10 points below fair value at 7:45 am ET. Asian markets closed lower (Japan down 3.03%, Hong Kong down 2.3%, Australia up 1.1%, India down 1.6%) and European markets are currently down 1.7% on weak economic data (Indian and Euro-zone Industrial Production came in weaker than expectations), disappointing earnings in Europe (EDF and DEO), and concerns that US retail sales are going to be weaker than expectations. Companies trading lower in Europe after earnings include BT Group (BT.A.LN) Cap Gemini (CAP.FP), EdF (EDF.FP), Smith & Nephew (SN.LN), and Diageo (DGE.LN). after EPS and Swiss Re (RUKN.VX) advanced after announcing its CEO resigned

Impact Research Calls/Market Moving News:

BIDU (133.86): Baidu consensus estimates may be aggressive, says Pali: Firm says Q1 and Q2 consensus estimates may be overly aggressive, as state owned businesses will be the first to benefit from Chinese gov't stimulus, and the trickle down effect will take time to make an impact on entities such as BIDU. Shares rated sell, target price, $90.

MAR (15.15): Marriott (MAR) reports Q4 EPS $0.34 ex-items vs Reuters $0.40, guides f09 EPS to $0.86-$1.04 vs Reuters $1.14. MAR says it cannot forecast results with any certainty. For Q1 of 2009, the company expects North American comparable company-operated REVPAR to decline roughly 17%, including the benefit of the shifting fiscal calendar, and comparable company-operated REVPAR outside North America to decline roughly 15%.

TEX (13.62): Terex says it may likely be in violation of a covenant in its credit agreement by the end of 1Q09: Due to deteriorating business conditions in certain of its operating segments and the impact of historical fixed charges incurred on a trailing twelve months basis, TEX may likely be in violation of the consolidated fixed charge coverage ratio covenant under its credit agreement as early as the end of Q1 of 2009. As a result, TEX has initiated discussions with its lead banks seeking to obtain a consent and/or amendment to its credit agreement and will attempt to get the consent and/or amendment during Q1

CMG (47.42): Chipotle Mexican Grill reports Q4 EPS $0.52 vs Reuters $0.48: Company reports revenues of $345.3M vs Reuters $340.9M. Comps for the quarter were +3.5% vs. StreetAccount +1.4%. CMG sees full year f09 comps in the low single digits.

RTP (110.94): Rio Tinto confirms partnership with Chinalco; Rio to receive $19.5B cash: The Boards of Rio Tinto plc and Rio Tinto Limited announce that they are unanimously recommending to shareholders a transaction with Aluminium Corporation of China ("Chinalco"). Investment by Chinalco in certain aluminium, copper and iron ore joint ventures totalling $12.3B. The issue of subordinated convertible bonds in two tranches with conversion prices of $45 and $60 in each of Rio Tinto plc and Rio Tinto Limited for a total consideration of $7.2B. If converted, the subordinated convertible bonds would increase Chinalco's current shareholding to 19.0% in Rio Tinto plc and 14.9% in Rio Tinto Limited, equivalent to an 18.0% interest in the Rio Tinto Group.

BHP (42.44): BHP Billiton (BHP) may look to trump Chinalco for some of Rio Tinto's assets - London Times: The Times reports that BHP is expected to approach the Rio Tinto board with a counter-offer for some of the mine stakes that are expected to be acquired by the Chinese. According to the article, BHP is understood to be particularly interested in Escondida, the Chilean copper mine that is the world's largest.

X (30.75): X will temporarily stop production at its East Texas plant, idling as many as 1200 workers.

ECA (43.10): EnCana reports Q4 operating EPS $0.60 vs Reuters $0.77: Company reports revenues of $6.36B vs Reuters $5.87B. Natural gas production increased 4% to 3.9 Bcf/d; Oil and natural gas liquids production in the quarter was flat at 136,000 bbls/d. Total production increased 3% to 4.7 Bcfe/d. Cash flow per share decreased 32% to $1.73.

PBR (29.22): Petrobras downgraded to hold from buy at Citi: Price target is $34. The firm cites valuation.

NYX (20.60): NYSE Euronext downgraded to hold from buy at Citi: Price target decreased to $21 from $24. The firm cites the current state of capital markets, lack of catalysts, and concern about expenses, among the rationale.

KSS (37.93): Kohl's downgraded to Conviction Sell from neutral at Goldman Sachs: Price target is $32. The firm cites valuation and believes 2009 EPS consensus is too high

LVS (3.98): Las Vegas Sands reports Q4 EPS ($0.04) ex items vs Reuters $0.03: Company reports revenues of $1.09B vs Reuters $1.18B.

JASO (3.01): JA Solar guides f09 revenue to $830-$952M vs Reuters $956.5M: F09 target for total production output is now 500 MW to 550 MW, below prior 800 MW, given on 12-Nov, though note the company cut Q4 guidance on 10-Dec without updating f09. The nameplate production capacity by year-end 2009 is now expected to be 875 MW. JASO says worldwide macro economic conditions; tight credit markets and resulting issues with project financing are negatively impacting the solar industry